Updater Services IPO gets 45% anchor allocated

About the Updater Services IPO

The anchor issue of Updater Services Ltd saw a very robust and strong response on 22nd September 2023 with 45% of the IPO size getting absorbed by the anchors. Out of the 2,13,33,333 shares (213.33 lakh shares approximately) on offer, the anchors picked up 96,00,000 shares (96 lakh shares) accounting for 45% of the total IPO size. The anchor placement reporting was made to the BSE late on Friday, September 22nd, 2023; one working day ahead of the IPO opening. The IPO of Updater Services Ltd opens on 25th September 2023 in the price band of ₹280 to ₹300 and will close for subscription on 27th September 2023 (both days inclusive).

The entire anchor allocation was made at the upper price band of ₹300. This includes the face value of ₹10 per share plus a premium of ₹290 per share, taking the anchor allocation price to ₹300 per share. Let us focus on the anchor allotment portion ahead of the Updater Services Ltd IPO, which saw the anchor bidding opening and also closing on 22nd September 2023. Before that, here is how the overall allocation will look.

The overall allocation to QIBs includes the anchor portion, so the anchor shares allotted will be deducted from the QIB quota for the purpose of the public issue.

Finer points of anchor allocation process

Before we go into the details of the actual anchor allotment, a quick word on the process of anchor placement. The anchor placement ahead of an IPO/FPO is different from a pre-IPO placement in that the anchor allocation has a lock-in period of just one month, although under the new rules, part of the anchor portion will be locked in for 3 months. It is just to give confidence to investors that the issue is backed by large established institutions.

However, the anchor investors cannot be allotted shares at a discount to the IPO price. This is explicitly stated in the SEBI revised regulations as under, “As per the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirement) Regulations, 2018, as amended, in case the Offer Price discovered through book building process is higher than the Anchor Investor Allocation Price, then the Anchor investors will be required to pay the difference by the pay-in as specified in the revised CAN.

An anchor investor in an IPO is normally a qualified institutional buyer (QIB) like a foreign portfolio investor or mutual fund or insurance company or a sovereign fund which invests before the IPO is made available to the public as per SEBI regulations. Anchor portion is part of the public issue, so the IPO portion to the public (QIB portion) is reduced to that extent. As initial investors, these anchors make the IPO process more attractive for investors, and instil confidence in them. Anchor investors also largely aid in price discovery of the IPO

Anchor placement story of Updater Services IPO

On 22nd September 2023, Updater Services Ltd completed the bidding for its anchor allocation. There was a strong and robust response as the anchor investors participated through the process of book building. A total of 96,00,000 shares were allotted to a total of 18 anchor investors. The allocation was done at the upper IPO price band of ₹300 (including premium of ₹290 per share) which resulted in an overall anchor allocation of ₹288 crore. The anchors have already absorbed 45% of the total issue size of ₹640 crore, which is indicative of fairly robust institutional demand.

Listed below are the 13 anchor investors who got allotted shares of more than 3% of the anchor portion as part of the overall anchor allocation quota for the IPO of Updater Services Ltd. The entire anchor allocation of ₹288 crore was spread across 18 major anchor investors. These 13 anchor investors listed below accounted for 91.67% of the total anchor allocation of Updater Services IPO and their participation will set the tone for retail participation in the IPO, when it opens for subscription on Monday, 25-Sep-2023.

Data Source: BSE Filings

The stock has not been too active in the grey market and hence the GMP data may not be entirely reliable. However, the huge response to the anchor allocation with 45% of the overall IPO getting absorbed by the anchors indicates that there is robust demand for the IPO, and that is the good news for the stock as it goes into IPO opening. The QIB portion in the IPO will be reduced to the extent of the anchor placement done above. Only the balance amount will be available for QIB allocation as part of the regular IPO.

The general norm is that, in anchor placements, smaller issues find it hard to get FPIs interested while larger issues do not interest mutual funds. Updater Services Ltd has witnessed anchor interest from domestic mutual funds, foreign portfolio investors, and even insurance companies.

Updater Services Ltd, in consultation with the book running lead managers (BRLMs) have allocated a total of 36,66,750 shares to domestic mutual funds, spread across 6 mutual fund schemes of 3 mutual fund AMCs. The mutual fund allocation alone is 38.2% of the total anchor book of Updater Services Ltd with an investment value of ₹110 crore.

Brief on the Updater Services Ltd business model

Updater Services Ltd, was incorporated in 1990 to offer facility management services and business support services. Updater Services Ltd predominantly operates in the Business-to-Business (B2B) services space offering a range of business services. These can be broadly classified under the IFM segment and the BSS segment. The internal facilities management (IFM) vertical offers production support services, soft services, engineering services, warehouse management, general staffing etc. The Business Support Services (BSS) vertical offers audit and assurance services. In addition, it also offers employee background verification, airport ground handling services, and sales enablement services.

Updater Services Ltd caters to more than 2,797 customers across various sectors, with customers straddling domestic and global markets. Some of its premium customers include Procter & Gamble, Aditya Birla Fashion and Retail Limited, Microsoft India, Hyundai Motors India, Saint-Gobain India etc. It manages its operations through offsite and onsite offerings based on the requirement of the customer. It operates across India through a network of over 4,331 locations. These exclude staffing locations; and the entire logistics are managed from 129 points of presence with 116 offices situated in India and 13 offices abroad.

The proceeds of the fresh issue portion will be used to repay / prepay outstanding loans availed by Updater Services Ltd and for pursuing inorganic initiatives. The company will also use the funds partly for working capital needs. The public issue of Updater Services Ltd will be lead managed by IIF Securities, Motilal Oswal Investment Advisors and SBI Capital Markets. The company appointed Link Intime India Private Ltd as the registrar to the issue.